German investors who want to open a company on the Spanish market can benefit of many tax advantages under the double taxation treaty (DTA) signed by Spain and Germany. The contracting states have signed the agreement for the avoidance of double taxation applicable to individuals and legal entities in 1966 but, since then, the treaty was amended several times. The latest amendment in this sense was signed in October 2012 and it became applicable from 1st of January 2013. Our team of Spanish company formation specialists can provide assistance on the main stipulations referring to the taxation of income.
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Taxes under the Spain-Germany DTA
The treaty is applicable to tax residents of the two contracting states and taxes which are covered by the agreement refer to the income taxes.
Spanish authorities will impose the following types of taxes:
- the income tax on individuals;
- the corporate tax;
- the income tax of non-residents;
- the capital tax;
- the local taxes on income and on capital.
Germany will impose similar taxes prescribed by the local legislation, as follows:
- the income tax;
- the corporation tax;
- the trade tax;
- the capital tax.
According to Article 4, a resident of one of the contracting states is a person or entity liable to taxation on the territory of that particular country; our team of Spanish company formation representatives can provide more details on this matter.
General provisions of the Spain –Germany DTA
The treaty for the avoidance of double taxation is established in order to set out the ways in which taxes will be collected for tax residents of a contracting state carrying out business activities (or taxable activities) in the other contracting state. According to the general stipulations of the agreement, the income of a company is taxed in the country where the company is a tax resident. However, the income can also be taxed in the foreign company where the business carries its activities, as long as the operations are set out through a permanent establishment.
A permanent establishment refers to a fixed placed of business, which can be an office, a factory, a mine or a construction site (where the operations last for a period longer than twelve months).
Persons who need more information on the level of taxation imposed by the Spain- Germany DTA can address to our team of Spanish company incorporation agents.